austin3515

I don't know. I don;t have to include these features at all. Wouldn't the availability just be subject to BRF? The terminated participant can roll their money to an IRA and take a tax favored distribution from their IRA.

ahh maybe it's ok because it is a "stated event." Similar to why match and profit sharing are ok to be withdrawn for hardship.

11 (B) CORONAVIRUS-RELATED DISTRIBUTIONS TREATED AS MEETING PLAN DISTRIBUTION REQUIREMENTS.—For purposes of the Internal Revenue Code of 1986, a coronavirus-related distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A)of such Code and section 8433(h)(1) of title 5, United States Code. 401(k)(2)(B)(i) is all the normal 401k distribution restrictions (hardship, 59 1/2). I believe QNECs/QMACs/Safe Harbors are all referenced to that same code for their distribution restrictions. But what about the profit sharing and match requirements on 5 years participation? Also, are we in agreement that these distributions can be restricted just to active employees? Terms can roll to IRA's first and take advantage of all of the repayment options.

I'm not so sure. I just read the pertientn language in the act. All I can see is that "a distribution" that is coronavirus related is not subject to the penalty. I do NOT see anywhere that a new distributable event was added??? Can this be an oversight uncovered by an international man of mystery??? Please tell me I am missing something because this seems to be a huge gaping hole.

I have thought about how commercial real estate might be in trouble as people realize the technology is almost all the way there for an efficient home office.

We have concluded that people can take loans while on leave/furlough. They are on leave so no payments are due for 1 year. They are on furlough and consuidered active so the employer expects them to have pay in the future, certainly within a year. And those payments, pursuant to the loan program, will be made via payroll deduction. You are eiother terminated (and eligible to close your account) or you are active (and eligible for in-service distributions and loans). There is not some third state in the middle. These furloughed people are no less a participant than any other participant who happens to be fortunate enough to receive a paycheck.

Just becauise I feel like we are operating in different realities. You agree that if a plan has husband and wife owners making $100,000 a year, and they have 10 employees making $30,000 a year, that a safe harbor match plan design is perfect? So they each get to contribute $19,500, get the $4,000 safe harbor match, and maybe one or two people get a $1,000 of safe harbor match? The fact that the plan is top heavy is moot because the plan is exempt from those rules. Admittedly if the world falls apart that can be problematic, but that's just not typically in the cards (and if it really falls apart you can term under substantial hardship rules and still be exempt). To read your responses you would think that you might advise against such a plan design?

Not that rare. We have a couple fast food chains that fit the bill. And you're saying that a SH Match only plan is not a good design? I cant understand that. When the work force is lower paid the owner gets an $11,000 match, maxes out his or her 401k, and the staff contribution might be next to nothing.

Really? Because a lot of mine are not wealthy. Some make a relatively modest income. Not poor, but not so wealthy that a 3% contribution would just be taken in stride. SH Match of $10,000 a year to top-heavy minimum of $30,000 a year would be, to put it mildly, a "problem."

See I KNEW this was going to happen.

Coleboy - Yes you are correct. I understood that there were no contributions to your plan besides 401k and safe harbor. Discontining the safe harbor match in a plan like tat could be absolutely devestating in terms of expense,. I think of the fast food chain with 6 months of eligibility with just a dozen managers participating. The top-heavy minimum would be multiples of the safe harbor match. In these situations, you have but one option. And even this option only works if the business is experiencing a "substantial business hardship." If your client is experiencing a substantial business hardship the plan can be terminated and still maintain its safe harbor status. There is no other way to preserve the safe harbor / top-heavy exemtpion. Hopefully they will fix this in time through legislation. I've already begun terminating a couple of plans because of this very very stupid rule. I actually hold out hope that someone will look at this and say "these top-heavy rules are so stupid!" and just get rid of them. They are a cancer that attacks small businesses. I don;t think cancer is too strong a word. Businesses that miss this rule in a manner I described will be decimated by this obligation. And clearly some will (most often those run by ABC payroll company or XYZ bundled provider). Edit: The term "substantial business hardship" has a very specific definition. Check out the regs.

But is it a taxable fringe benefit? That's the real question here. Anyone know or have a thought?

I guess your point is be conservative and treat it as wages. I suppose there is a lot of sense in that.

Someone is out sick and eligible for pay under one of these paid leave rules. I have essentially no knowledge or expertise in what paid leaves are all about but now my client wants to know if they pay it, is it eligible compensation? They DO exclude taxable fringe benefits. Would this be considered a taxable fringe benefit? I'm inclined to say it is because it seems to go beyond the normal "I get 3 sick days a year" type of policy where if someone stays home sick, its just part of their normal pay. But I'm in the dark here...

For sure there will be relief in 2020. There just has to be.

But you agree with me that you would be at a disadvantage if a client had taken advantage of the relief and not distributed the safe harbor notice?

That's not nitpicking at all. Thanks for the clarification! "It is reasonable to expect that the plan will be continued only if the waiver is granted." What is this last one all about? I'm confused because the definition applies in the context of a plan termination? It was not included in the EOB. Maybe you included the full language that I think really applies to a DB minimum funding waiver?

My understanding is to discontinue the SH mid-year the Safe Harbor Notice has to say this is a possibility. The only exception that would allow discontinuance absent the language in the notice is the economic loss exception. So no notice, no economic loss, no discontinuing the safe harbor contributions. So even a sharp drop in profitability is not a good enough reason. Think about a medical practice that is now cancelling all elective surgeries or a dentist cancelling all cleanings. They'll still make money but might still see the need to discontinue. If they opted not to send out the Safe Harbor Notice they would not have the option to discontinue. ie., do others agree that even a SH plan should ALWAYS send the Safe Harbor Notice out for this reason?

The only way to avoid the THM (i.e., the only way to preserve the safe harbor status and top heavy exemption) currently is to terminate the plan, but that only works if it is a substantial business hardship. From the EOB the hardship rule is defined as follows: 2.c.2)a) Definition of business hardship. IRC §412(c)(2) lists the following factors as relevant to a determination of business hardship: (1) the employer is operating at an economic loss, (2) there is substantial unemployment or underemployment in the trade or business and in the industry concerned, and (3) the sales and profits of the industry concerned are depressed or declining. I spent an hour and a half reading up on these rules this morning. I advise everyone to read the section of the EOB that goes over this.

thank you Loius! I actually found that one this morning. What I am hoping for though is an article that discusses specifically whether a layoff or a furlough creates a distrbiutable event. My recollection from past research is that it can be very gray, especall for layoffs. Presumably the restaurateur that laid off the wait staff expects to hire them all back. It's such a gray area.

So an employer furloughs half its work force for 30 days. They are scheduled to come back in 30 days. They are still active correct? And cannot take a distribution? Similarly, they would be considered to be on a leave with respect to their loans?

Personally I would not recommend getting the least bit aggressive on these rules. The client does not have write a check. And the costs of correcting if the Ira disagrees With you would be very costly if you used those forfeitures...

So one of the requirements to disconitnue Safe Harbor contributions is that the safe harbor notice had to say "the employer reserves the right to discontinue the safe harbor contribution." Then comes the SECURE Act and says "you don;t need to send the safe harbor notice for 3% SHNEC plans," If we take that advice do we still get the flexibility of discontinunng the safe harbor? Apparently there is an exception to this notice requirement if they are operating at an "economic loss" but I'm just wondering if they tricked us into eliminating an available option. Note: I have already discovered that this rule is essentially meaningless because we almost always include a discretionary ACP Safe Harbor Match even if we never use it. And in this scenario a SH Notice is still required.

To be more clear, you only take into account involutnatry terminations when determining if there was a partial term. Then you fully vest anyone who terminates for any reason (thats the dumb part; the guy who quit for another job gets a windfall). And because they have already exceeded the 20% threshhold, in this case by a wide margin, there is no way it could decrease from there.

No offense but that is of course easy to say when its not your money. The business that just laid off 35% of its work force needs every penny to leave the lights on.